Articles Tagged with tax evasion

IMG_0081-300x193In his book, Moneyland, Oliver Bullough details how wealthy individuals and large companies take advantage of a long list of loopholes to hide profits and leverage their control over the world. With a combination of geography and demography, Bullough takes readers on a journey of the corrupt practices followed by some of the most influential entities in the world.

Tax havens and lenient laws are part of what makes such an extreme level of corruption possible, and seemingly legal. Known tax havens like the Cayman Islands, Bermuda, and Switzerland have been used by corporations and individuals around the world to hide profits and reduce tax fees for decades. With little to no taxes owed on profits in these locations, tax havens are extremely inviting to the greedy. But how does it work?

The idea is quite simple. For example, a company in the United States merely has to open a subsidiary located in a tax haven to reroute profits and enjoy the more lenient practices of that area. This practice is only made safer for the individuals involved due to the fact that most tax havens have little to no legislation preventing or criminalizing such acts.

deforestation-300x200The destructed land left from the acts of deforestation is an eerie sight. A distant treeline, fallen logs, and disrupted vegetation seem both natural and unnatural, and perhaps rightly so. In a recent investigation performed by Victor Galaz and members of the Stockholm Resilience Center, many acts of Amazonian deforestation can be directly linked to foreign tax havens. Why? Because there’s lots of money to be made in the destruction of these forests, which are eventually used by massive beef and soy companies to turn a profit. However, the fish industry, worth over $23 billion annually, is yet another market at the root of environmental destruction by use of oversea tax havens.

The Link Between Overfishing and Tax Havens

There is a reason why fishing boats are given a daily fish quota, as well as restrictions on the species of fish that they can keep; The environment. The practice of overfishing is capable of wiping out entire species. However, this can be viewed as limited profits for the companies involved in these restrictions; less fish equals less profits. For companies like this, it’s tempting to find a way around these regulations, and foreign tax havens offer the perfect opportunity.

tax evasionAccording to a list by Oxfam, a charitable organization that works to alleviate global poverty, Bermuda is the worst corporate tax haven in the world. Joining Bermuda on this list are fourteen other tax havens, which include the Cayman Islands and British Virgin Islands. But, what makes Bermuda stand out among the others noted on this list?

Creating The List

Oxfam did not take the creation of this list lightly. In order to determine the tax havens that belonged on the list, Oxfam carefully researched numerous factors, including the presence of exceptionally low or nonexistent corporate tax rates and unfair tax incentives. Oxfam also took into consideration the cooperation, or lack of cooperation, of these tax havens in regards to international regulations designed to combat tax evasion. During its extensive research, Oxfam found that Bermuda and other British territories were among the worst tax havens in the world. This is especially true when considering the United State’s use of these tax havens.

Bermuda-300x225Bermuda was placed on an updated blacklist as a non-cooperative tax jurisdiction by the European Union. The EU hopes that this will inspire Bermuda, as well the other captive domiciles on the list, to take the concept of tax evasion and avoidance seriously, and keep globe financial in order.

Bermuda is listed alongside Aruba, Barbados, Guam, Vanuatu, and the US Virgin Islands. The creation of the updated EU blacklist was a result of a European Commission directed research and investigation. This time there were 10 new countries added to the updated list, which means 15 total jurisdictions are currently on it.

The general criteria for the EU blacklist involves three things. The first was tax transparency, which makes all financial actions easily visible in order to avoid any chance of hidden corruption. The second is good governance that will assure all financial actions are being monitored efficiently by a selected party. The third is the rate of economic activity and the verification of that activity to assure that there is a real, steady, and prospering economic flow.

tax havenReports from London have shown that nearly a third of the billionaires located in Britain plan to or have already moved to areas considered tax havens. In addition to this sudden shift, there is also talk of an investigation into political party bankrolling from those that have chosen to relocate, as well as the delay in a vote involving the end of secret company ownership in offshore territories.

According to the Times news, 28 out of the 93 recorded British billionaires have been found through public record to have moved or been in the process of moving to a tax haven within the last decade.

Tax havens are locations in the world in which taxation is extremely light or sometimes even non-existent. Examples of these are the Channel Islands or countries like Switzerland and the United Arab Emirates that pay little to no tax.

NC-health-care-fraud-300x199Mental health company owner, Catinia Denise Farrington of Cyprus, Texas, pleaded guilty to health care fraud and tax evasion in September of 2018. As of March 1st, 2019, she has been sentenced to 60 months in prison after profiting $4 million from Medicaid and just under $400,000 from her tax evasion scheme.

Health Care Fraud Conspiracy

According to prosecutors, Farrington owned a mental health care company out of North Carolina, Durham County Mental Health and Behavioral Health Services, LLC. Through this company, she submitted thousands of fraudulent claims to Medicaid for services that were never performed. These incidents occurred between 2011 and 2015, but this is not the only fraudulent activity that Farrington participated in during this time.

Google-tax-evasion-300x200Google, a renowned international technology company, was found to be using a Dutch shell company in order to reduce its foreign tax bill in 2017 by shifting $24 billion, 19.9 billion euros, of its revenue from royalties to Bermuda. The amount shifted in 2017 through the Netherlands was 4 billion euros more than what was documented in 2016. This information is according to documents filed at the Dutch Chamber of Commerce.

To further explain how this worked, Google used the subsidiary in the Netherlands, Google Netherlands Holdings BV, to shift their revenue made outside of the United States, their home country, to an affiliated base in Bermuda, which is essentially a known tax haven where companies are not required to pay an income tax. This base is called Google Ireland Holdings, and the tax strategy used here is known as the “Double Irish, Dutch Sandwich”. Surprisingly, this is a legal strategy which has allowed Google, who is owned by Alphabet, to avoid US income taxes and European withholding taxes, saving a large portion of their overseas profits.

When addressed through calls and emails about this shifting situation, Google stated that “We pay all of the taxes due and comply with the tax laws in every country we operate in around the world,” and continued in detail to say “Google, like other multinational companies, pays the vast majority of its corporate income tax in its home country, and we have paid a global effective tax rate of 26% over the last 10 years.”

Turkish-journalist-sentenced-300x200After a lawsuit was filed against investigative journalist, Pelin Ünker, for her reporting on the Paradise Papers, an Istanbul court has found her guilty of defaming Turkey’s former Prime Minister, Binali Yildirim. For speaking against Yildirim and reporting on his confirmed offshore activities, Ünker has been sentenced to thirteen months in jail and a substantial fee. However, this unjust ruling is truly unique, as it appears to have involved several political motivations in an effort to send a message to other Turkish journalists and silence similar reports in the future.

The Paradise Papers

But, what exactly are the Paradise Papers? The Paradise Papers are essentially a vast collection of leaked documents including emails, deeds, loan agreements, financial statements, and additional documents that reveal how several politicians, celebrities, and entire corporations stored hidden profits in offshore tax havens. The documents were initially leaked to a German newspaper from offshore service providers. However, the International Consortium of Investigative Journalists (ICIJ) agreed to review the documents before publishing any written work on the released documents. This movement brought together the investigative journalists and media partners of six continents; Pelin Ünker was one of these journalists.

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According to a company filing, the Internal Revenue Service says that Caterpillar Inc. owes the United States Government back taxes and penalties in the amount of about $2.3 billion.  Caterpillar does not agree and says it will continue to vigorously oppose the IRS position. The tax liabilities stem from Caterpillar’s offshore tax strategy and has been steadily increasing while the IRS completes audits of the company’s income tax filings dating back to 2007,  some issues carrying back to 2005. The offshore tax which Caterpillar started in 2000 uses a comprehensive accounting of its structure which was first revealed by a Caterpillar tax specialist who became a whistleblower claiming that the company retaliated against him for insisting the tax strategy had problems. A U.S. Senate subcommittee investigation that labeled the tax maneuver an abusive corporate tax shelter.

The tax strategy involved the company’s  parts business and a Swiss subsidiary. Profits for the parts sales were recorded in Switzerland — and taxed at a lower negotiated rate than in the United States even though nearly all parts operations remained in the United States.  The Swiss subsidiary at the center of the tax strategy also featured prominently in a different investigation that dramatically unveiled itself for the public in the spring of 2017.

The case then went to the U.S. District Court for the Central District of Illinois. In March of last year,  federal agents simultaneously raided Caterpillar’s global headquarters in Peoria and facilities in Morton and East Peoria to seize documents and information regarding parts sales, export controls and money transfers between the parent company and overseas subsidiaries, among other items — all with a particular focus on the Swiss subsidiary.

paradise papersThe Paradise Papers Offer a Glimpse of Ultra Rich Money Practices

Swirling around in the media and online is a leak of financial documents called The Paradise Papers. Within the terabits of information lies the documented offshore accounts of politicians, celebrities, multinational corporations and even royalty. There is something else buried in the data according to The Gateway—money laundering and tax evasion.

The Trail of Money